GSG Construction Pvt. Ltd., Hyd, Hyderabad V. ITO, Ward-2(2), Hyd, Hyderabad

ITA 767/HYD/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2456 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 24-10-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 23-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Assessee Lawyers: S RAMA RAO
• Keywords: Capital asset; Revised return; Capital expenditure
• Section: 143(3); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A , HYDERABAD BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI D.S. SUNDER SINGH, ACCOUNTANT MEMBER I.T.A. NOS. 766, 767 & 768/HYD/2016 ASSESSMENT YEARS: 2009-10, 2010-11 & 2011-12 GSG CONSTRUCTION PVT. LTD., HYDERABAD. PAN AACCG 1785 D VS INCOME-TAX OFFICER, WARD 2(2), HYDERABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S. RAMA RAO FOR REVENUE : SMT. SUMAN MALIK DATE OF HEARING : 22-05-2017 DATE OF PRONOUNCEMENT : 26-05-2017 O R D E R PER D.S. SUNDER SINGH, A.M.: ALL THESE APPEALS FILED BY ONE ASSESSEE ARE DIRECTE D AGAINST A COMMON ORDER OF CIT(A) 2, HYDERABAD, DATED, 18-0 2-2016 FOR THE AYS 2009-10 TO 2011-12. AS IDENTICAL ISSUE IS INVOL VED IN THESE APPEALS, THEY WERE CLUBBED AND HEARD TOGETHER AND, THEREFORE, WE FIND IT CONVENIENT TO DISPOSE OF THESE APPEALS BY A CONS OLIDATED ORDER. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-CO MPANY, A DEVELOPER, FILED ITS RETURN OF INCOME FOR THE ASSES SMENT YEARS 2009-10, 2010-11 AND 2011-12 ON 24-09-2009, 14.10.2010 AND 1 6-12- 2011RESPECTIVELY ADMITTING NIL INCOME. THE AO COMPL ETED THE ASSESSMENTS U/S. 143(3) OF THE ACT BY TREATING THE INTEREST INCOME EARNED OF RS.58,56,030/-, RS. 1,10,15,907/- & RS. 1 ,21,54,303/- FOR THE I.T.A. NOS. 766 TO 768 /HYD/2016 GSG CONSTRUCTION PVT. LTD. :- 2 -: AYS. 2009-10, 2010-11 AND 2011-12 RESPECTIVELY AS I NCOME FROM OTHER SOURCES. 2.1 THE FACTS AS TAKEN FROM AY 2010-11 ARE THAT RET URN OF INCOME WAS FILED ON 14-10-2010 ADMITTING NIL INCOME FROM B USINESS. THE CASE WAS PROCESSED AND SUBSEQUENTLY REOPENED BY THE AO U NDER SECTION 147 OF THE ACT FOR TAXING INTEREST INCOME OF RS. 1, 10,15,907 RECEIVED FROM THE JOINT VENTURE. NAMED GSG DRDL CONSORTIUM ( AOP) IN WHICH THE ASSESSEE IS A CONSTITUENT. SUBSEQUENTLY ASSESSE E FILED A REVISED RETURN ON 30-08-2013 ADJUSTING THE INTEREST AMOUNT IN CAPITAL WORK-IN- PROGRESS (WIP) AND CLAIMING REFUND OF THE INTEREST AMOUNT OF RS.11,01,591/-. NON INCLUSION OF INTEREST AMOUNT IN THE ORIGINAL RETURN WAS FOR THE REASON THE ASSESSEE STATES THAT IT WAS NOT AWARE OF THE CREDIT OF INTEREST BY THE CONSORTIUM AS ON THE DATE OF FILING OF THE RETURN. 2.2. ASSESSEE HAS ENTERED INTO AN MEMORANDUM OF UND ERSTANDING (MOU) WITH DLF RETAIL DEVELOPERS LTD. FOR DEVELOPME NT OF PROPERTY. THE JOINT VENTURE IS NAMED GSG DRDL CONSORTIUM (AOP ) WITH EACH CONSTITUENT HAVING 50% SHARE. THE TWO CONSTITUENTS HAVE AGREED TO JOINTLY TO PULL THEIR RESOURCES TO CONSTRUCT A COMM ERCIAL PROPERTY IN BASHEERBAGH HYDERABAD. REVENUE SHARING BASIS WAS FI XED AT 50: 50 UPON COMPLETION OF CONSTRUCTION. IT WAS ALSO DECIDE D THAT THE PROJECT SHALL BE MANAGED BY A COMMITTEE COMPRISING OF MEMBE RS FROM BOTH SIDES. IT WAS AGREED THAT THE INVESTMENT IN THE PRO JECT SHALL BE SHARED IN THE RATIO OF 50: 50. IT WAS ALSO DECIDED THAT TH E EACH MEMBER WILL GET INTEREST AT PREVAILING RATE ON THE UNSPENT AMOUNT O F INVESTMENT AS ON THE LAST DATE OF THE FINANCIAL YEAR. THE INTEREST A MOUNT CREDITED TO THE ACCOUNT OF THE ASSESSEE REPRESENTS SUCH INTEREST. I N THIS ARRANGEMENT THE JOINT VENTURE (JV) (AOP) WAS ONLY MANAGING THE FUNDS. THE WORK WAS EXECUTED BY THE CONSTITUENT NAMELY GSG WHICH WA S RESPONSIBLE FOR DEVELOPING, MANAGING AND OPERATING THE PROJECT. I.T.A. NOS. 766 TO 768 /HYD/2016 GSG CONSTRUCTION PVT. LTD. :- 3 -: 2.3. IT WAS THE SUBMISSION OF THE ASSESSEE THAT SI NCE COMMERCIAL OPERATION HAS NOT COMMENCED, AND MATTER IS LOCKED U P IN LITIGATION, THE INTEREST CREDITED CANNOT BE TAXED. IT WAS SUBMITTED THAT THE INTEREST HAS ONLY ACCRUED AND CREDITED. THE SAME HAS NOT BEE N RECEIVED AND THERE IS NO LIKELIHOOD OF RECEIPT OF THE SAME AS TH E MATTER RELATING TO JV IS UNDER ARBITRATION AND THE FATE OF RECEIPT OF THIS AMOUNT IS UNCERTAIN. IT WAS FURTHER CONTENDED THAT THE INTERE ST ACCRUED TO THE ASSESSEE HAS TO BE REDUCED FROM CAPITAL WORK IN P-O GRESS (WIP). ON THE OTHER HAND, IT WAS THE CONTENTION OF THE AO THA T SINCE THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM, IT HAS TO ACCOUNT F OR THE ACCRUED INTEREST. IT WAS FURTHER OBSERVED BY THE AO THAT UN LESS THERE IS AN INEXTRICABLE LINK BETWEEN THE RECEIPT OF INTEREST AND BUSINESS, THE INTEREST INCOME CANNOT BE RELATED TO BUSINESS INCOM E AND ACCOUNTED FOR IN REDUCING WIP DURING PRE-COMMENCEMENT PERIOD. IN THIS REGARD, THE OBSERVATIONS OF THE AO FOR THE AY 2010-11 ARE A S UNDER: '3. FROM THE OTHER DETAILS/ DOCUMENTS OBTAINED FROM THE ASSESSEE DURING THE COURSE OF HEARINGS FOR THE ASSESSMENT YE AR 2011-12, IT WAS MADE OUT THET THE ASSESSEE COMPANY AND TRT/S DL F RETAIL DEVELOPERS LIMITED, FORMED INTO A CONSORTIUM AOPI B Y NAME GSG DRDL CONSORTIUM, VIDE MOU DATED 19.1 0.2006 FOR EXE CUTING CERTAIN DEVELOPMENTAL WORKS, WITH 50% SHARE EACH. A S PER CLAUSE 2.7 OF THE MOU, BOTH THE PARTIES SHALL BRING IN THE IR SHARE OF INVESTMENTS INTO THE AOP BY WAY OF INTEREST BEARING LOANS: THIS CLAUSE OF THE MOU, INTER-ALIA, EVIDENCE THAT THE IN VESTMENTS MADE BY THE CONSTITUENT PARTIES OF THE AOP BEAR INTEREST . THE FINANCIALS OF THE AOP CONSORTIUM ALSO SHOW PAYMENT OF INTEREST ON LOANS BROUGHT IN BY THE CONSTITUENT PARTIES. IT WAS FURTH ER BROUGHT OUT BY THE ASSESSEE THAT SOME .DIFFERENCES CROPPED UP BETW EEN THEM AND M/S DLF RETAIL DEVELOPERS L.TD., IN RELATION TO EXECUTION OF THE MOU AND ARBITRATION PROCEEDINGS ARE UNDERWAY FOR SE TTLEMENT OF THEIR RESPECTIVE CLAIMS. 3.1 THOUGH THE 26-AS DETAILS INDICATE THAT TDS WAS DEDUCTED FROM THE INTEREST CREDITED TO THE ACCOUNT OF THE AS SESSEE AND FURTHER THE MOU ENTERED INTO ALSO CLEARLY INDICATE THAT THE INVESTING FUNDS BEAR INTEREST, CONSIDERING THE SUBM ISSIONS OF THE ASSESSEE AND THE DISPUTES ARISING BETWEEN THE TWO C ONSTITUENTS OF THE AOPI THE CONSORTIUM AOP M/S GSG DRDL CONSORTIUM , DELHI WERE ASKED TO CONFIRM THE PAYMENT OF INTEREST. IN R ESPONSE, THE I.T.A. NOS. 766 TO 768 /HYD/2016 GSG CONSTRUCTION PVT. LTD. :- 4 -: AOP VIDE THEIR LETTERS DATED 04.02.2014 AND 07.03.2 014 CONFIRMED THAT THEY DEDUCTED TDS AND DEPOSITED IN CENTRAL GOV ERNMENT ACCOUNT AS PER RULE OF INCOME TAX ACT ON ACCOUNT OF INTEREST ACCRUED BUT NOT DUE. THE CONSORTIUM FURTHER CONFIRM ED THAT THOUGH NO INTEREST PAYMENT WAS MADE TO THE ASSESSEE BUT THEIR ACCOUNT HAS BEEN CREDITED WITH THE SAID AMOUNT OF I NTEREST. ACCORDINGLY, THE CONSORTIUM PRODUCED COPIES OF FINA NCIALS FOR VARIOUS ASSESSMENT VEERS, INCLUDING THE SUBJECT ASS ESSMENT YEAR. THE BALANCE APPEARING IN THE NAME OF THE ASSE SSEE IN THE BOOKS OF CONSORTIUM AND ITS EFFECT WILL BE DISCUSSE D IN THE ENSUING PARAGRAPHS. 4. BRINGING OUT THE ABOVE CONFIRMATION OF CREDIT TO THE ACCOUNT OF THE ASSESSEE IN THE BOOKS OF CONSORTIUM AND OTHER C LAUSES OF THE MOU, THE ASSESSEE WAS ASKED WHY THE INTEREST AMOUNT OF RS.1,10,15,907/- SHOULD NOT BE CONSIDERED AS INCOME IN THEIR HANDS FOR THE SUBJECT ASSESSMENT YEAR. IN RESPONSE, THE ASSESSEE REITERATING THEIR SUBMISSIONS MADE VIDE NOTE GIVEN IN THE REVISED COMPUTATION, SUBMITTED THAT THOUGH THE CONSORTIUM C REDITED THEIR BOOKS WITH INTEREST AND DEDUCTED TDS, THEY HAVE NOT RECEIVED ANY INTEREST TILL DATE AND THEY ARE DOUBTFUL OF RECOVER Y OF THE SAME. THE ASSESSEE ALSO MADE AN ALTERNATE PLEA THAT SINC E THE INTEREST ELEMENT IN THEIR HANDS IS OUT OF UNUTILIZED FUNDS C ONTRIBUTED BY THEM TO THE CONSORTIUM, ANY ACCRUAL I INTEREST OUT OF THE ABOVE SHOULD BE REDUCED FROM THE WIP INSTEAD OF TREATING THE SAME AS INCOME FROM OTHER SOURCES. IN SUPPORT OF THIS ALTER NATE PLEA, THE ASSESSEE RELIED ON THE DECISION OF BOMBAY HIGH COUR T IN THE CASE OF CIT V. LOK HOLDINGS (BOMBAY) REPORTED IN 308 ITR 356. DURING THE COURSE OF PRESENT PROCEEDINGS, THE ASSESSEE ALS O FILED A COPY OF THE DECISION OF THE APEX COURT IN THE CASE OF CI T V. EXCEL INDUSTRIES LTD (358 ITR 295) AND SUBMITTED THAT THE SINCE NO INTEREST WAS RECEIVED BY THEM TILL DATE, THE TAXABI LITY OF SUCH INTEREST DOES NOT ARISE. 5. THE SUBMISSIONS OF THE ASSESSEE ARE CONSIDERED. IN THE FIRST PLACE, THE ASSESSEE HAD NOT RECOGNIZED ANY RECEIPT OF INTEREST IN THEIR HANDS WHILE FILING THE ORIGINAL RETURN OF INC OME FOR THE SUBJECT ASSESSMENT YEAR ON 14.10.2010, WHILE THE INTEREST W AS BROUGHT INTO THE BOOKS FOR THE IMMEDIATELY PRECEDING ASSESS MENT YEAR 2009-10. HOWEVER, WHEN THE FACTS OF CREDITING THEIR ACCOUNT BY THE CONSORTIUM WITH THE GROSS AMOUNT OF RS. 1,10,15 ,907/- TOWARDS INTEREST AND SUBSEQUENT DEDUCTION OF TOS WA S BROUGHT TO THEIR NOTICE BY WAY OF REOPENING THE CASE AND ISSUE OF NOTICE U/S 148 ON 31.07.2013, IN THE REVISED RETURN FILED ON 3 0.08.2013, THE ASSESSEE ADMITTED THE INTEREST OF RS. 1.10 CRORE AN D REDUCED THE CLOSING WIP BY THIS AMOUNT AND CLAIMED THE CORRESPO NDING TDS ON SUCH INTEREST IN THE REVISED COMPUTATION. IN THE COMPUTATION I.T.A. NOS. 766 TO 768 /HYD/2016 GSG CONSTRUCTION PVT. LTD. :- 5 -: THE ASSESSEE ALSO CLAIMED THE TOS MADE AT RS. 11,01 ,591/- AS REFUNDABLE. 5.1 THE MOOT POINT ARISING FOR CONSIDERATION HERE I S HOW THE CAPITAL WORK-IN-PROGRESS SHOWN AT RS. 1,19,31,448/- IN THE AUDITED BOOKS OF ACCOUNT AS ON 31.03.2010 CAN BE REDUCED IN THE REVISED COMPUTATION OF INCOME FILED IN RESPONSE TO NOTICE U /S 148? WHEN QUESTIONED, ON THIS ASPECT, THE ASSESSEE VIDE LETTE R DATED 25.12.2014 SUBMITTED THAT ON THE DATE OF FILING OF REVISED RETURN, I.E. ON 30.08.2013, GENERAL ENTRIES WERE PASSED RED UCING THE AMOUNT OF TDS RECEIVABLE (RS.11,01,591) AND THE AMO UNT OF INTEREST RECEIVABLE (RS.99,14,316) FROM M/S GSG DRD L CONSORTIUM FROM THE CAPITAL WORK-IN-PROGRESS AS ON THE DATE OF FILING THE REVISED RETURN OF INCOME. A LEDGER COPY OF 'CAPITAL WORK- IN-PROGRESS' PERTAINING TO THE FINANCIAL YEAR 2013- 14, WHEREIN THE TREATMENT GIVEN TO THE INTEREST PERTAINING TO THE A SSESSMENT YEAR 2010-11, WAS ALSO FILED. HOWEVER, THE ADJUSTMENTS, AS ABOVE, MADE IN THE CAPITAL WORK-IN-PROGRESS DURING THE FIN ANCIAL YEAR 2013-14 ARE A RESULT OF REOPENING OF THE ASSESSMENT FOR THE SUBJECT ASSESSMENT YEAR AND NOT VOLUNTARY ON THE PA RT OF THE ASSESSEE. 5.2 BE THAT AS IT MAY, THE NEXT ISSUE FOR CONSIDERA TION IS WHETHER THE INTEREST RECEIPT IS TO BE TAXED AS INCOME FROM OTHER SOURCES IN THE LIGHT OF THE FACT THAT THE INTEREST ACCRUED TO THE ASSESSEE ON THE INVESTMENTS MADE IN THE CONSORTIUM OR THAT THE SAME - CAN BE REDUCED FROM THE CAPITAL WIP? AS PER THE MOU ENTERE D BY THE ASSESSEE AND M/S DRDL CONSTITUTING THE AOP, M/S GSG DRDL CONSORTIUM. INTEREST IS DUE TO THE PARTIES OF THE A OP AT THE YEAR END ON THE UNUTILIZED FUNDS. ACCORDINGLY, THE AOP H AS CREDITED THE ACCOUNT OF THE ASSESSEE WITH THE INTEREST DUE O N THE FUNDS OF THE ASSESSEE AT RS. 1,10,15,907/- AND DEDUCTED TDS AT APPLICABLE RATES. SINCE THESE FACTS ARE BORNE OUT O F RECORD, AND ADMITTEDLY THE ASSESSEE IS FOLLOWING MERCANTILE SYS TEM OF ACCOUNTING THE INTEREST OF RS.1.10 CRORES IS TO BE TAXED IN THE HANDS OF THE ASSESSEE, REGARDLESS OF THE FURTHER CL AIMS OF DOUBTFULNESS EXPRESSED BY THE ASSESSEE ON RECOVERIN G THE BALANCE INTEREST AMOUNT FROM THE AOP. ACCORDINGLY, THE AMOUNT OF RS.1,10,15,907/- BEING INTEREST, IS BROUGHT TO T AX IN THE HANDS OF THE ASSESSEE. 6. THE NEXT ASPECT FOR CONSIDERATION IS THE TREATME NT TO BE GIVEN TO THIS RECEIPT OF INTEREST OF RS.1,10,15,907/- IN THE HANDS OF THE ASSESSEE. AS PER THE CLAIM PUT FORTH BY THE ASSESSE E VIDE THEIR REVISED RETURN AND FURTHER FILING OF CASE LAWS, THE INTEREST HAS TO BE REDUCED FROM THE CLOSING WIP AND CANNOT BE TAXED AS INCOME FROM OTHER SOURCES. THE SUBMISSIONS AND THE CASE LA W OF THE ASSESSEE ARE CONSIDERED. ADMITTEDLY, THE ASSESSEE H AD NOT I.T.A. NOS. 766 TO 768 /HYD/2016 GSG CONSTRUCTION PVT. LTD. :- 6 -: STARTED ITS COMMERCIAL OPERATIONS BY THE END OF THE SUBJECT ASSESSMENT YEAR. IT IS A SETTLED LAW THAT UNLESS TH ERE IS AN INEXTRICABLE NEXUS WITH THE NATURE OF THE BUSINESS OF THE ASSESSEE, INTEREST EARNED ON INVESTMENTS IS TO BE T REATED AS INCOME FROM OTHER SOURCES. THE FINANCIALS OF THE CO NSORTIUM M/S GSG-DRDL CONSORTIUM, FOR THE ASSESSMENT YEAR 2010-1 1 SHOW THE CREDIT BALANCE OF THE ASSESSEE AT RS. 8,18,87,7 50/- AGAINST RS. 4,29,76,775/- ADMITTED BY THE ASSESSEE AS INVES TMENTS IN THE CONSORTIUM GSG-DRDL CONSORTIUM. THE DIFFERENCE BETW EEN THE ADMITTED FIGURE BY THE ASSESSEE AND THE CREDIT BALA NCE IN THE BOOKS OF THE CONSORTIUM IS THE INTEREST CREDITED TO THE ACCOUNTS OF THE ASSESSEE ON ACCRUAL BASIS. IT IS SINCE THE CONS ORTIUM HAS NOT STARTED ITS BUSINESS, THE INVESTMENTS MADE BY THE A SSESSEE ARE BEING INCREASED WITH THE ACCRUED INTEREST ON SUCH C APITAL INVESTMENTS. AS A COROLLARY, SINCE THE INVESTMENTS ARE YIELDING INTEREST, THE ASSESSEE SHOULD ADMIT THE SAME AS INC OME FROM SUCH INVESTMENTS. 6.1 AS PER THE MOU, INTEREST HAS TO BE PAID ON THE FUNDS REMAINING AT THE END OF THE YEAR LEFT UNUTILIZED OU T OF THEIR CONTRIBUTIONS MADE TO THE AOP. THIS CLAUSE IN THE M OU IS DRIVEN BY COMMON BUSINESS EXIGENCIES AND NOT BY ANY COMPU LSION; AS WAS IN THE CASE LAW RELIED UPON BY THE ASSESSEE. TH E ASSESSEE CLAIMED THAT THIS INTEREST AMOUNT IS TO BE NETTED O FF AGAINST CLOSING WIP, CLAIMING THAT THIS INTEREST INCOMES SH OULD GO TO REDUCE THE PRE-PRODUCTION EXPENSES WHICH WOULD ULTI MATELY BE CAPITALIZED. THE TEST TO BE APPLIED FOR DETERMINING THE ISSUE ON HAND IS THAT- THE INCOME EARNING ACTIVITIES OF THE ASSESSEE ARE TO BE INTRINSICALLY CONNECTED WITH THE BUSINESS OF THE ASSESSEE AND THEREFORE THE SAME CAN BE SET OFF AGAINST CAPITA/EX PENDITURE I REDUCE THE COST OF CAPITAL ASSET. IN THE CASE ON HA ND, THE ASSESSEE INVESTED CERTAIN FUNDS IN THE CONSORTIUM A ND THE CONSORTIUM IS CREDITING INTEREST ON THE OUTSTANDING BALANCE DUE TO THE ASSESSEE. THEREFORE, THE INTEREST-YIELDING INVE STMENTS CANNOT BE SAID TO BE THE BUSINESS OF THE ASSESSEE AND THE INTEREST ACCRUED ON SUCH INVESTMENTS CANNOT BE REDUCED FROM THE CAPITAL WIP. THE ISSUE OF EARNING INTEREST FROM BORROWED I OWN FUNDS WAS SPECIFICALLY DEALT WITH IN THE CASE OF TUTICORIN AL KALI CHEMICALS & FERTILIZERS LTD (227 ITR 172), WHEREIN IT WAS HELD THAT THE INTEREST EARNED ON BORROWED FUNDS IS TAXABLE AS INCOME FROM OTHER SOURCES. THE SAME ISSUE WAS ALSO DECIDED BY THE APE X COURT IN THE CASE OF BONGAIGAON REFINERY & PETROCHEMICALS LT D 251 ITR 329 (SC). 6.2 BY A PLAIN READING OF THE ABOVE DECISIONS, THE INTEREST INCOME WAS EXCLUDED FROM THE INCOMES THAT CAN BE CAPITALIZ ED BEFORE COMMENCEMENT OF BUSINESS OPERATIONS. IN A RECENT DE CISION IN THE CASE OF BHARAT OMAN REFINERIES LTD V. CIT (2013) (2 18 TAXMANN I.T.A. NOS. 766 TO 768 /HYD/2016 GSG CONSTRUCTION PVT. LTD. :- 7 -: 282), THE HIGH COURT OF MADHAYA PRADESH, AFFIRMED T HE ABOVE VIEW OF THE APEX COURT. 6.3 AS REGARDS THE CASE LAWS RELIED UPON BY THE ASS ESSEE IN SUPPORT OF REDUCING THE INTEREST FROM CAPITAL WIP, IT IS SEEN THAT THE FACTS OF THE DECISION OF BOMBAY HIGH COURT IN T HE CASE OF CIT V. LOK HOLDINGS (BOMBAY) REPORTED IN 308 ITR 356 AR E TOTALLY DIFFERENT TO THE FACTS OF CASE ON HAND. IN THIS CAS E, THE FACTS ARE THAT M/S LOK HOLDINGS ARE IN THE BUSINESS OF CONSTR UCTION AND RECEIVED ADVANCES FROM CUSTOMERS, WHICH WERE DEPOSI TED IN BANKS. THE INTEREST ACCRUED ON SUCH ADVANCES WAS TR EATED AS INCOME FROM OTHER SOURCES BY THE AO. IT IS AGAINST THIS TREATMENT, THE BOMBAY HIGH COURT HELD THAT SINCE RECEIPT OF AD VANCES IS PART ITS BUSINESS OF THE ASSESSEE, THE INTEREST ACCRUED ON SUCH BUSINESS ADVANCES GO TO REDUCE THE CAPITAL WIP, TIL L THE CONCLUSION OF THE PROJECT. HOWEVER, IN THE CASE ON HAND, THE ASSESSEE HAS INVESTED AN AMOUNT OF RS.429.76 LAKHS IN THE CONSORTIUM AND THE SAID GSG DRDL CONSORTIUM, WHICH WAS ENTRUSTED WITH THE JOB OF MAINTAINING THE BOOKS OF ACCOUNT OF THE CONSORTIUM, HAS CREDITED THE ACCOUNT OF THE ASSESS EE WITH THE INTEREST AMOUNT, LYING UNUTILIZED AT THE YEAR END T HEREFORE, GOING BY THE ABOVE FACTS, THE INTEREST IS BORNE OUT OF TH E INVESTMENT MADE BY THE ASSESSEE IN THE CONSORTIUM AND THIS CA NNOT BE ADJUSTED AGAINST THE CLOSING WIP OF THE ASSESSEES'S OWN BUSINESS: ACCORDINGLY, RELIANCE OF THE ASSESSEE ON THE ABOVE CASE LAW MISPLACED AND THEREFORE NOT CONSIDERED. 6.4 THE NEXT RELIANCE PLACED BY THE ASSESSEE IS THE DECISION IN THE CASE OF CIT VS. EXCEL INDUSTRIES LTD ( 358 ITR 295). IN THIS CASE, M/S EXCEL INDUSTRIES HAS NOT INCLUDED THE ACC RUAL OF ADVANCE LICENSE BENEFITS, WHICH ARE DIRECTLY RELATA BLE TO IMPORTS. IN OTHERWORDS THE ADVANCE LICENCE BENEFITS / DUTY B ENEFITS ACCRUE TO THE ASSESSEE ONCE ITS IMPORTS THE GOODS. IT IS O N THIS ISSUE, THE HIGH COURT HELD THAT TILL ACTUAL IMPORT OF GOODS NO INCOME ACCRUES TO THE ASSESSEE AND SINCE HYPOTHETICAL INCOMES CANN OT BE CONSIDERED AS REAL INCOME, AND ACCORDINGLY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. IN THE CASE ON HAND, THE IN TEREST ACCRUED FROM THE CONSORTIUM IS NOT HYPOTHETICAL AND THE ACC OUNT OF THE ASSESSEE IN THE CONSORTIUM WAS CREDITED WITH THE IN TEREST INCOME AND TDS AT APPLICABLE RATES WAS MADE U/S 194A. THE CLOSING BALANCE FOR THE YEAR ENDING 31.03.2010 IN THE BOOKS OF CONSORTIUM IS RS. 8,18,87,750/- AGAINST THE INVESTM ENT MADE AND ADMITTED AT RS.4,27,76,775/- BY THE ASSESSEE IN THE IR BOOKS. THEREFORE, THIS CASE LAW IS ALSO DISTINGUISHABLE TO THE FACTS OF THE CASE AND ACCORDINGLY NOT FOLLOWED. 6.5 NOW COMING TO THE SIMPLE ACCOUNTING PRINCIPLES, INTEREST INCOME ACCRUED TO THE ASSESSEE FROM THE CONSORTIUM ON THE I.T.A. NOS. 766 TO 768 /HYD/2016 GSG CONSTRUCTION PVT. LTD. :- 8 -: INVESTMENTS MADE BY IT IS TO BE ADMITTED AS INCOME. AGREEING, WITHOUT CONCEDING, THAT THE INTEREST ACCRUED OUT OF THE INVESTMENT 'S DOUBTFUL, GOING BY THE SIMPLE ACCOUNTING PRINCIP LES, THE INTEREST ACCRUED SHOULD HAVE BEEN ADDED TO THE INVESTMENTS S INCE THE ACCOUNT OF THE ASSESSEE IN THE BOOKS OF CONSORTIUM IS BEING CREDITED WITH THE INTEREST ACCRUED ON THE INVESTMEN TS MADE. HOWEVER, THE ASSESSEE CHOSE TO IGNORE THE ENTIRE T RANSACTION, BY ROT ADMITTING THE INTEREST INCOME OR BY INCREASING THE INVESTMENT BY THE AMOUNT OF INTEREST ACCRUED. 7. IN THE LIGHT OF ABOVE DISCUSSION, THE INTEREST O F RS.1,10,15,907/- ACCRUED ON INVESTMENTS MADE BY THE ASSESSEE IN CONS ORTIUM IS TREATED AS INCOME FROM OTHER SOURCES AND ASSESSED A S SUCH. 2.4 SIMILAR OBSERVATIONS WERE MADE BY AO IN RESPECT OF A.YS.2009- 10 AND 2011-12 ALSO AND TREATED THE INTEREST ACCRUE D ON INVESTMENTS AS INCOME FROM OTHER SOURCES. 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE CARRI ED THE MATTER IN APPEAL BEFORE THE CIT(A). THE SUBMISSIONS MADE BY T HE AR OF THE ASSESSEE WERE EXTRACTED BY THE CIT(A) IN HIS APPEAL AT PAGES 10 TO 12. 4. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE CIT(A) OBSERVED THAT AS PER THE MOU ENTERED BY THE ASSESSE E AND M/S DRDL CONSTITUTING THE AOP, M/S GSG DRDL CONSORTIUM, INTE REST IS DUE TO THE PARTIES OF THE AOP AT THE YEAR END ON THE UNUTI LIZED FUNDS. ACCORDINGLY, THE AOP HAS CREDITED THE ACCOUNT OF TH E ASSESSEE WITH THE INTEREST DUE ON THE FUNDS OF THE ASSESSEE AT RS . 1,10,15,907/- AND DEDUCTED TDS AT APPLICABLE RATES. SINCE THESE FACTS ARE BORNE OUT OF RECORD, AND ADMITTEDLY THE ASSESSEE IS FOLLOWING ME RCANTILE SYSTEM OF ACCOUNTING, THE INTEREST OF RS. 1.10 CRORES IS TO B E TAXED IN THE HANDS OF THE ASSESSEE. 4.1 CIT(A) FURTHER OBSERVED THAT THIS CLAUSE IN TH E MOU IS DRIVEN BY COMMON BUSINESS EXIGENCIES AND NOT BY ANY COMPULSIO N. THE ASSESSEE CLAIMED THAT THIS INTEREST AMOUNT IS TO BE NETTED OFF AGAINST I.T.A. NOS. 766 TO 768 /HYD/2016 GSG CONSTRUCTION PVT. LTD. :- 9 -: CLOSING WIP, CLAIMING THAT THIS INTEREST INCOME SHO ULD GO TO REDUCE THE PRE-PRODUCTION EXPENSES WHICH WOULD ULTIMATELY BE CAPITALIZED. THE TEST TO BE APPLIED FOR DETERMINING THE ISSUE ON HAN D IS THAT THE INCOME EARNING ACTIVITIES OF THE ASSESSEE ARE TO BE INTRIN SICALLY CONNECTED WITH THE BUSINESS OF THE ASSESSEE AND THEREFORE THE SAME CAN BE SET OFF AGAINST CAPITAL EXPENDITURE / REDUCE THE COST OF CA PITAL ASSET. IN THE CASE ON HAND, THE ASSESSEE INVESTED CERTAIN FUNDS I N THE CONSORTIUM AND THE CONSORTIUM IS CREDITING INTEREST ON THE OUT STANDING BALANCE DUE TO THE ASSESSEE. THEREFORE, THE INTEREST-YIELDING I NVESTMENTS CANNOT BE SAID TO BE THE BUSINESS OF THE ASSESSEE AND THE INTEREST ACCRUED ON SUCH INVESTMENTS CANNOT BE REDUCED FROM THE CAPITAL WIP. 4.2 THE CIT(A) OBSERVED THAT THE AR POINTS OUT THAT THE ASSESSEE HAS EARNED INTEREST OUT OF ITS OWN FUNDS AND NOT ON THE FUNDS BORROWED. THIS VIEW OF THE AR IS NOT CORRECT. IT IS IMMATERIAL WHETHER THE FUNDS ARE OWN OR BORROWED. WHAT IS MATERIAL IS WHETHER SUCH FUNDS (OWN OR BORROWED), HAVE EARNED ANY INTEREST TO THE ASSESSEE BEFORE THE COMMENCEMENT OF THE BUSINESS. IF THAT BEING THE CASE, THE INTEREST SO EARNED HAS TO BE TREATED AS 'INCOME FROM OTHER S OURCES' ONLY. AS THE BUSINESS HAS NOT BEEN COMMENCED, THE INTEREST I NCOME SO EARNED CANNOT BE LINKED WITH THE BUSINESS OF THE ASSESSEE. IN OTHER WORDS, IT IS NOT THE INCOME FROM BUSINESS. BUT, IT IS INCOME FROM OTHER SOURCES. THE AO HAS DEALT THE ISSUE ELABORATELY AND ALSO DIS TINGUISHED THE ASSESSEE'S CASE WITH OTHER CASES RELIED UPON BY THE AR IN THE RELEVANT PARAGRAPHS OF THE ASSESSMENT ORDER AND THEREFORE, A CTION OF THE AO IS CORRECT IN BRINGING TO TAX THE ABOVE INCOMES UNDER 'INCOME FROM OTHER SOURCES. 4.3 FINALLY, THE CIT(A) RELYING ON THE DECISION OF THE ITAT, HYDERABAD IN THE CASE OF M/S KAKINADA SEZ PVT. LTD. , IN ITA NO. 1218/HYD/2010, DTD. 29/12/2010, HELD THAT THE INTER EST IN QUESTION EARNED FROM UNUTILIZED FUNDS IS TO BE ASSESSED AS INCOME FROM OTHER I.T.A. NOS. 766 TO 768 /HYD/2016 GSG CONSTRUCTION PVT. LTD. :- 10 -: SOURCES AND HENCE, CONFIRMED THE ACTION OF THE AO I N BRINGING TO TAX THE AMOUNTS OF RS. 58,56,030/-, RS. 1,10,15,907/- A ND RS. 1,21,54,303/- FOR AYS 2009-10, 2010-11 AND 2011-12 RESPECTIVELY. 5. AGGRIEVED BY THE ORDER OF CIT(A), THE ASSESSEE I S IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL, WHICH ARE COMMON IN ALL THE APPEALS UNDER CONSIDERATION, EXCEPT THE QUANTUM OF ADDITION: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME- TAX (APPEALS) IS ERRONEOUS BOTH ON FACTS AND IN LAW. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN M AKING ADDITION ON THE GROUND THAT IT REPRESENTS INTEREST INCOME EA RNED BY THE ASSESSEE FROM UNUTILIZED INVESTMENTS. 3. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME O F HEARING. 5.1 THE ASSESSEE FILED A PETITION FOR ADMISSION OF THE FOLLOWING ADDITIONAL GROUND: THE AO AND THE CIT(A) OUGHT TO HAVE CONSIDERED THE FACT THAT ANY INCOME I.E., SHARE INCOME OR INTEREST OR REMUNE RATION RECEIVED FROM AOP BY A MEMBER CAN BE ASSESSED ONLY IN ACCORDANCE WITH THE PROVISIONS OF SECTION 67A OF TH E IT ACT, AND NOT OTHERWISE. 6. LD. AR APPEARING FOR THE ASSESSEE SUBMITTED THAT ASSESSEE IS A MEMBER OF AOP(JOINT VENTURE) NAMELY, GSG DRDL CONSO RTIUM CONSTITUTED SPECIFICALLY FOR FUNDING THE GHMC PROJE CT. HE SUBMITTED THAT THE ASSESSEE HAS ENTERED INTO A MEMORANDUM OF UNDERSTANDING WITH DLF RETAIL DEVELOPERS LTD. FOR DEVELOPMENT OF THE PROPERTY WITH PROFIT SHARING RATIO OF 50:50 AND CONTRIBUTED THE C APITAL IN THE FORM OF INTEREST BEARING LOANS. AOP CONSORTIUM HAS NOT INVE STED ANY SURPLUS FUNDS FOR THE PURPOSE OF EARNING THE INTEREST INCOM E. INTEREST CLAUSE WAS INCLUDED IN THE MOU TO EQUATE THE CONTRIBUTION S MADE BY THE MEMBERS OF THE AOP AND TO COMPENSATE THE CAPITAL CO NTRIBUTIONS OF THE MEMBERS. SINCE, INTEREST RECEIVED WAS ON THE CA PITAL CONTRIBUTION MADE TO AOP(JV), WHOSE WORK IS EXCLUSIVELY FUNDING THE GHMC I.T.A. NOS. 766 TO 768 /HYD/2016 GSG CONSTRUCTION PVT. LTD. :- 11 -: PROJECT, THE INTEREST RECEIVED FROM THE AOP IS DIRE CTLY LINKED TO THE BUSINESS ACTIVITY OF THE ASSESSEE I.E. DEVELOPING P ROJECT. HE SUBMITTED THAT IN THE ASSESSEES CASE, ASSESSEE HAS COMMENCED THE BUSINESS ACTIVITY BY TAKING APPROVALS FROM LOCAL AUTHORITIES AND COMMENCEMENT OF CONSTRUCTION ACTIVITY AND THERE IS SUBSTANTIAL WORK-IN-PROGRESS CARRIED ON BY THE ASSESSEE EVERY YEAR AND IS EVIDE NT FROM THE BALANCE SHEET AND THE FINANCIAL STATEMENTS OF ASSES SEE COMPANY. THE LD.A.R FURTHER SUBMITTED THAT SO FAR THE ASSESSEE H AS NOT RECEIVED THE INTEREST, AND IT WAS CREDITED TO THE CAPITAL ACCOU NT IN THE AOP AND THERE IS NO CERTAINTY OF RECEIVING THE INTEREST SIN CE THE CASE HAS GONE FOR ARBITRATION. THE LD. A.R SUBMITTED THAT AS A DE VELOPER, THE BUSINESS COMMENCES WITH ACQUIRING THE LAND, EITHER BY PURCHASE OR BY DEVELOPMENT AGREEMENT AND TAKING APPROVALS. HE SUBM ITTED THAT ONCE THE ASSESSEE HAS COMMENCED THE CONSTRUCTION ACTIVIT Y, THE BUSINESS IS COMMENCED AND THE CONTENTION OF THE AO AND CIT(A) T HAT THERE IS NO BUSINESS ACTIVITY HAS BEEN COMMENCED IS FAR FROM TH E TRUTH. HE SUBMITTED THAT SINCE THE BUSINESS ACTIVITY HAS COMM ENCED, THE INTEREST RECEIVED ON THE CAPITAL CONTRIBUTION MADE BY THE AS SESSEE TO AOP SHOULD GO TO REDUCE THE WORK-IN-PROGRESS AND CANNOT BE ASSESSED AS INCOME FROM OTHER SOURCES. HE SUBMITTED THAT THE AS SESSEE HAS NOT INVESTED THE SURPLUS FUNDS TO EARN THE INTEREST IN COME AND THE SOLE ACTIVITY OF THE ASSESSEE IS DEVELOPER AND DEVELOPIN G ONLY GHMC PROJECTS. ACCORDINGLY, THE LD. AR VEHEMENTLY OPPOSE D THE ORDERS OF REVENUE AUTHORITIES AND REQUESTED TO SET OFF THE IN TEREST CREDITED TO THE CAPITAL ACCOUNT TO REDUCE IN THE WORK-IN-PROGRESS A ND SHOULD NOT BE ASSESSED AS INCOME FROM OTHER SOURCES AS A SEPARAT E SOURCE. 7.0 LD. AR ALSO RAISED AN ADDITIONAL GROUND IN RESP ECT OF COMPUTATION OF INCOME OF AOP IN ACCORDANCE WITH THE PROVISIONS OF SECTION 67A OF THE ACT. I.T.A. NOS. 766 TO 768 /HYD/2016 GSG CONSTRUCTION PVT. LTD. :- 12 -: 8.0. LD. AR SUBMITTED THAT THE ASSESSEE IS A MEMBER OF AOP CARRYING BUSINESS ACTIVITY FOR A COMMON CAUSE AND SHARING T HE PROFITS AND THE SHARES ARE DETERMINED BY THE MOU. THE CAPITAL CONTR IBUTION ATTRACTS INTEREST AS PER THE MOU TO COMPENSATE THE CONTRIBUT ION PROPERLY. HE SUBMITTED THAT SINCE THE PROFIT SHARING IS EQUAL,TH E AOP IS DETERMINATIVE AND THE INCOME OF AOP IS REQUIRED TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 67A 86, 1 67B OF THE ACT, WHICH IS SEPARATE CODE BY ITSELF. HE CONTENDED THAT THE AO IGNORED THE SECTION 67A AND PREFERRED TO TAX THE INTEREST IN TH E HANDS OF ASSESSEE INSTEAD OF COMPUTING THE INCOME IN THE HANDS OF AOP AS PER THE PROVISIONS OF SECTION 67A AND TO TAX THE SHARE INC OME AS A MEMBER OF THE AOP IN THE ASSESSEES HANDS. THIS ASPECT WAS NO T CONSIDERED BY THE REVENUE AUTHORITIES AND SUBMITTED THAT THE I SSUE GOES TO THE ROOT OF THE ASSESSMENT AND REQUESTED FOR ADMISSION OF AD DITIONAL GROUND AND ADJUDICATE THE SAME. 9.0. PER CONTRA, LD. DR STRONGLY SUPPORTED THE ORDE RS OF REVENUE AUTHORITIES AND SUBMITTED THAT IN THE ASSESSEES CA SE, THE BUSINESS ACTIVITY HAS NOT YET COMMENCED AND AS PER THE MOU, IT IS CLEARLY EVIDENT THAT THE FUNDS CONTRIBUTED BY THE MEMBERS O F THE AOP BEARS INTEREST AND EVEN INTEREST ON UNUTILIZED FUNDS. LD. DR SUBMITTED THAT AS PER FORM 26AS, IT WAS CLEARLY MENTIONED THAT IN TEREST WAS CREDITED TO THE CAPITAL ACCOUNT AND TO THE EXTENT OF INTERES T PAYMENT THE CAPITAL ACCOUNTS WERE INCREASED. LD. DR RELIED ON THE DECIS IONS OF HONBLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMI CALS VS. CIT, 141 CTR 387 (SC) AND BONGAIGAON REFINERY AND OTHERS VS. CIT, 251 ITR 329 SC AND ARGUED THAT THERE IS NO ERROR IN THE ORD ERS OF REVENUE AUTHORITIES AND NO INTERFERENCE IS CALLED FOR IN TH E SAME. 10.0. IN THE REJOINDER, THE LD. AR ARGUED THAT THE CASE LAWS OF HONBLE SUPREME COURT RELIED UPON BY THE DR ARE DISTINGUISH ABLE FROM THE FACTS OF THE ASSESSEES CASE AND HAVE NO APPLICATIO N. IN THE CASES I.T.A. NOS. 766 TO 768 /HYD/2016 GSG CONSTRUCTION PVT. LTD. :- 13 -: RELIED UPON BY THE LD. DR, SURPLUS FUNDS WERE PARKE D IN THE BANKS, PENDING FORMATION OF THE PROJECTS AND EARNED THE IN TEREST ON THE DEPOSITS. THE HONBLE SUPREME COURT HELD TO TAX SUC H INTEREST INCOME ON THE DEPOSITS AS INCOME FROM OTHER SOURCES, WHERE AS, IN THE ASSESSEES CASE FUNDS WERE PARKED IN THE AOP WHOLLY FOR UTILIZATION OF CONSTRUCTION OF GHMC PROJECT, WHICH WAS UNDERTAKEN BY THE ASSESSEE. HE, THEREFORE, SUBMITTED THAT THE FACTS ARE CLEARLY DISTINGUISHABLE AND THE CASE LAWS RELIED UPON BY THE LD. DR ARE NOT APP LICABLE IN THIS CASE. 12. WE HAVE HEARD BOTH THE PARTIES CAREFULLY AND PE RUSED THE MATERIAL ON RECORD. IT IS OBSERVED THAT THE ASSESSE E IS A MEMBER OF AOP AND THE INTEREST CREDITED TO THE CAPITAL ACCOUN T OF THE AOP AND INTEREST IS PAID OR CREDITED IN ACCORDANCE WITH THE MOU ENTERED INTO BY THE ASSESSEE AND THE ANOTHER CONSTITUENT DRDL OF TH E AOP(JV). THERE IS NO DISPUTE WITH REGARD TO THE STATUS OF AOP. SIN CE THE INTEREST IS PAID ON THE CONTRIBUTION MADE BY THE ASSESSEE AS A MEMBER OF THE AOP, WE ARE OF THE CONSIDERED OPINION THAT THE ADDI TIONAL GROUND RAISED BY THE ASSESSEE GOES TO THE ROOT OF THE ASSE SSMENT, HENCE, THE ADDITIONAL GROUND IS ADMITTED. 13. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL FACTS ON RECORD. THE AOP HAS PAID INTEREST OF RS. RS. 58, 56,030/-, RS. 1,10,15,907/- AND RS. 1,21,54,303/- FOR AYS 2009-10 , 2010-11 AND 2011-12 RESPECTIVELY TO THE ASSESSEE ON THE CAPITAL CONTRIBUTION MADE BY THE ASSESSEE AS A MEMBER OF AOP. THERE IS NO DIS PUTE WITH REGARD TO THE PROFIT SHARING AS MEMBER OF AOP. AOP IS CONS TITUTED FOR MANAGEMENT OF THE FUNDS FOR CONSTRUCTION OF GHMC PR OJECT. AS PER THE PROVISIONS OF INCOME-TAX ACT, THE INCOME OF THE AOP IS REQUIRED TO BE COMPUTED IN ACCORDANCE WITH THE PROVISIONS OF SECTI ON 67A OF THE IT ACT. I.T.A. NOS. 766 TO 768 /HYD/2016 GSG CONSTRUCTION PVT. LTD. :- 14 -: WE HAVE CAREFULLY GONE THROUGH THE PROVISIONS OF S ECTION 67A, WHICH READS AS UNDER: 67A. METHOD OF COMPUTING A MEMBERS SHARE IN INCOM E OF ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS.- (1) IN COMPUTING THE TOTAL INCOME OF AN ASSESSEE WHO IS A MEMBER OF AN ASSOCIATION OF PERSO NS OR A BODY OF INDIVIDUALS WHEREIN THE SHARES OF THE MEMBERS ARE D ETERMINATE AND KNOWN OTHER THAN A COMPANY OR A COOPERATIVE SOCIETY OR A SOCIETY REGISTERED UNDER THE SOCIETIES REGISTRATION ACT, 1860 (21 OF 1860), OR UNDER ANY LAW CORRESPONDING TO THAT ACT IN FORCE IN ANY PART OF I NDIA, WHETHER THE NET RESULT OF THE COMPUTATION OF THE TOTAL INCOME OF SUCH ASSO CIATION OR BODY IS A PROFIT OR A LOSS, HIS SHARE (WHETHER A NET PROFIT OR NET L OSS) SHALL BE COMPUTED AS FOLLOWS, NAMELY : (A) ANY INTEREST, SALARY, BONUS, COMMISSION OR REMU NERATION BY WHATEVER NAME CALLED, PAID TO ANY MEMBER IN RESPECT OF THE P REVIOUS YEAR SHALL BE DEDUCTED FROM THE TOTAL INCOME OF THE ASSOCIATION O R BODY AND THE BALANCE ASCERTAINED AND APPORTIONED AMONG THE MEMBERS IN TH E PROPORTIONS IN WHICH THEY ARE ENTITLED TO SHARE IN THE INCOME OF THE ASS OCIATION OR BODY ; (B) WHERE THE AMOUNT APPORTIONED TO A MEMBER UNDER CLAUSE (A) IS A PROFIT, ANY INTEREST, SALARY, BONUS, COMMISSION OR REMUNERA TION AFORESAID PAID TO THE MEMBER BY THE ASSOCIATION OR BODY IN RESPECT OF THE PREVIOUS YEAR SHALL BE ADDED TO THAT AMOUNT, AND THE RESULT SHALL BE TREAT ED AS THE MEMBERS SHARE IN THE INCOME OF THE ASSOCIATION OR BODY ; (C) WHERE THE AMOUNT APPORTIONED TO A MEMBER UNDER CLAUSE (A) IS A LOSS, ANY INTEREST, SALARY, BONUS, COMMISSION OR REMUNERA TION AFORESAID PAID TO THE MEMBER BY THE ASSOCIATION OR BODY IN RESPECT OF THE PREVIOUS YEAR SHALL BE ADJUSTED AGAINST THAT AMOUNT, AND THE RESULT SHALL BE TREATED AS THE MEMBERS SHARE IN THE INCOME OF THE ASSOCIATION OR BODY. (2) THE SHARE OF A MEMBER IN THE INCOME OR LOSS OF THE ASSOCIATION OR BODY, AS COMPUTED UNDER SUB-SECTION (1), SHALL, FOR THE P URPOSES OF ASSESSMENT, BE APPORTIONED UNDER THE VARIOUS HEADS OF INCOME IN TH E SAME MANNER IN WHICH THE INCOME OR LOSS OF THE ASSOCIATION OR BODY HAS B EEN DETERMINED UNDER EACH HEAD OF INCOME. (3) ANY INTEREST PAID BY A MEMBER ON CAPITAL BORROW ED BY HIM FOR THE PURPOSES OF INVESTMENT IN THE ASSOCIATION OR BODY S HALL, IN COMPUTING HIS SHARE CHARGEABLE UNDER THE HEAD PROFITS AND GAINS OF BUSINESS OR PROFESSION IN RESPECT OF HIS SHARE IN THE INCOME O F THE ASSOCIATION OR BODY, BE DEDUCTED FROM HIS SHARE. EXPLANATION.IN THIS SECTION, PAID HAS THE SAME M EANING AS IS ASSIGNED TO IT IN CLAUSE (2) OF SECTION 43. 13.1 AS PER SECTION 67A, THE TOTAL INCOME OF THE A OP HAS TO BE DETERMINED AS PER THE PROVISIONS OF INCOME TAX ACT, UNDER THE DIFFERENT HEADS AND SHARE INCOME OF THE ASSESSEE HAS TO BE DE TERMINED SEPARATELY AS PROVIDED IN SECTION 67A OF THE INCOME -TAX ACT INCLUSIVE I.T.A. NOS. 766 TO 768 /HYD/2016 GSG CONSTRUCTION PVT. LTD. :- 15 -: OF ANY SALARY, INTEREST, BONUS OR REMUNERATION PAID TO ANY MEMBER IN RESPECT OF PREVIOUS YEAR RELEVANT TO AY. THE MODE O F DETERMINING THE SHARE INCOME HAS BEEN CLEARLY PROVIDED IN SECTION 6 7A OF THE IT ACT. AS PER SECTION 67A, THE TOTAL INCOME OF THE AOP FRO M ALL THE HEADS OF INCOME SHOULD BE COMPUTED AND, THEN, ANY SALARY, IN TEREST, BONUS, COMMISSION OR REMUNERATION PAID TO MEMBER OF THE AO P SHALL BE DEDUCTED FROM THE TOTAL INCOME OF THE AOP. BALANCE, IF ANY, SHOULD BE APPORTIONED IN THE HANDS OF MEMBERS OF THE AOP IN P ROPORTIONATE TO THEIR SHARE HOLDING RATIO IN THE AOP. THE SHARE OF PROFIT OR LOSS AND THE SALARY, REMUNERATION, INTEREST ETC. PAID TO THE MEM BER OF THE AOP CONSTITUTE THE SHARE INCOME OF THE MEMBER WHICH SHO ULD BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE SINCE THE SHARES O F THE AOP ARE DETERMINATE. IN THE INSTANT CASE ASSESSEE IS MEMBE R OF AOP AND RECEIVED INTEREST AS MEMBER OF THE AOP, HENCE AS PER SECTION 67A, THE INCOME HAS TO BE COMPUTED IN THE HANDS OF AOP A ND THE SHARE INCOME HAS TO BE BROUGHT TO TAX IN THE HANDS OF MEM BER OF AOP. THIS ISSUE HAS NOT BEEN CONSIDERED BY THIS AO OR CIT(A). THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT THE ISSUE SHOULD BE REMITTED BACK TO THE FILE OF THE AO TO CONSIDER TAXING THE SHARE INCOME OF THE ASSESSEE AS PER THE PROVISIONS OF SECTION IT ACT. THIS VIEW IS SUPPORTED BY THE HONBLE MP HIGH COURT DECISION IN THE CASE OF CIT V S. D&H SECHERON ELECTRODES LTD., 290 ITR 697. ACCORDINGLY, WE SET A SIDE THE ISSUE IN DISPUTE TO THE FILE OF THE AO WITH A DIRECTION TO C OMPUTE THE INCOME OF THE AOP AND THE SHARE INCOME OF THE AOP IN THE HAND S OF THE MEMBERS OF AOP I.E. ASSESSEE. ACCORDINGLY, THE ADDI TIONAL GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSES. 13.2 AS WE HAVE ADJUDICATED THE ADDITIONAL GROUND R AISED BY THE ASSESSEE AND THE ISSUE RAISED THEREIN IS REMITTED BACK TO THE FILE OF THE AO, WE CONSIDER IT IS NOT NECESSARY TO ADJUDICA TE THE ORIGINAL GROUNDS RAISED BY THE ASSESSEE IN GROUND NO. 2. GR OUND NOS. 1 & 3 ARE GENERAL IN NATURE, HENCE, NEED NO ADJUDICATION. I.T.A. NOS. 766 TO 768 /HYD/2016 GSG CONSTRUCTION PVT. LTD. :- 16 -: 14. IN THE RESULT, ALL THE APPEALS UNDER CONSIDERAT ION ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 26 TH MAY, 2017. SD/- SD/- (V. DURGA RAO) (D.S. SUNDER SING H) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED: 26 TH MAY , 2017. KV 1 GSG CONSTRUCTION PVT. LTD., C/O SRI S. RAMA RAO, ADVOCATE, FLAT NO. 102, SHRIYAS ELEGANCE, 3-6-643, STREET NO. 9, HIMAYAT NAGAR, HYDERABAD 500 029 2 ITO, WARD 2(2), SIGNATURE TOWERS, OPP. BOTANICA L GARDEN, KONDAPUR, HYD. 3 CIT (A)-2, HYDERABAD. 4 PR. CIT 2, HYDERABAD. 5 THE DR, ITAT HYDERABAD 6 GUARD FILE